VoIP Driving the Restruction of Telecommunications

1
VoIP Driving the Restruction of Telecommunications

• Prof. Kaili Kan
• Beijing Univ. of Posts Telecommunications
• ITU Future of Voice Workshop
• Geneva Jan. 16, 2007

2
Is VoIP Killing Telecom ?

• Telcos claim
• VoIP is IT invading telecom
• VoIP robs voice revenue from telcos
• VoIP takes a free ride of telcos hard-built
  network infrastructure
• The Martians are coming !
• Telecom sector in turmoil WHY ?

3
Current Structure of Telecom

• Vertical integration (OSI 7 layers)
• Network Service
• History background
• Shortage of bandwidth
• Single servicevoice
• However, time has changed.

4
Surplus Optical Bandwidth

• Bandwidth telcos core product
• Cost of bandwidth
• Infinite bandwidth over fiber
• Cost approaches zero cross-Atlantic lt
  USD0.0001/min. (ITU 1996)
• Price of bandwidth
• Redundancy Each telco builds its own fiber
  cables for vertical integration
• Price to be driven to zero even faster than cost

5
The Killer

• Law of Economics
• oversupply kills supplier
• Telcos killed themselves by oversupplying
  bandwidth
• Why blame it on VoIP ? Nothing to do with VoIP,
  except

6
Telcos Options for Survival

• Option 1 Break network service vertical
  integration
• Build less, use more open cable capacity to
  service providers
• Telcos become hollow pipes
• Option 2 Insist on network service vertical
  integration squeeze revenue/profit out of
  inefficient usage of bandwidth,
• Fact many telcos chose Option 2.

7
Telcos Strategy to Survive

• Voice transmission (no service)
• Small bandwidth
• Lack of price elasticity
• Broadband data/video
• Large bandwidth
• High price-elasticity
• Strategy high-price for narrow-band voice,
  low-price for broadband data/video
• Classical case of 3rd class price-discrimination
  Price reversely proportional to elasticity

8
Conditions for Price-Discrimination

• Shortage of supply
• True before copper, 1G, 2G, etc.
• NOT true now fiber, 3G, Wi-Fi/ WiMAX
• Insulation of markets no cross-border smuggling

9
Role of VoIP

• Breaks insulation Smuggles voice into
  low-priced broadband market
• Eliminates price-discrimination of voice vs.
  data/video
• Forces telcos to go back to Option 1
• Service providers share telcos fiber cable
• Telcos become hollow pipes
• Vertical network-service integration broken
• However, with fiber cables already over-built,
  too late.

10
Future of Telecom

• Internet/IP technology
• Independent of physical network
• Terminator of vertical integration by nature
• Vertical integration broken
• Networks bandwidth, access
• Services liberated
• Telcos
• Fixed network telcos degenerate into hollow
  pipes
• Mobile operators extinction (VoIP Wi-Fi/ WiMAX)

11
Vision

• Internet Of the people, by the people, for the
  people
• VoIP restructuring telecom (a revolution)
• Breaking telcos network service vertical
  integration equals to convergence

12
China at a Crossroad

• Background
• Telcos State Owned Enterprises (SOEs)
• National security issue
• VoIP situation
• Officially illegal nationwide
• 4 experiments by Telecom and Netcom in own
  territory since mid-2005
• Proliferation in underground / gray market
• VoIP deployment only a matter of time

13
Thank You

• kankaili_at_gmail.com